Big Data in Risk Management

September 10, 2016

We all know that over 90% of the world’s data has been generated only in the last two years. Forward-looking organizations, especially e-commerce, have already begun capitalizing on this gold mine. But what does the Big Data revolution mean for financial services, particularly the risk management function?

Risk management faces new demands and challenges. In response to the spate of recent financial crises, regulators are insisting on ever more detailed data and increasingly sophisticated reporting. Banks are now required to conduct regular, comprehensive bottom-up stress tests for a variety of scenarios across all major asset classes.

Put simply, Big Data represents the future of risk management. Why? Big Data technologies can help Risk teams gain better intelligence, drawn from a variety of data sources, in almost real-time. Within the financial services industry, Big Data can enable asset managers, banks and insurance companies to proactively detect potential risks, react much faster and kimore effectively, and make better decisions on the back of insights from thousands of risk variables.

Time is a critical factor in reacting to risks, and if you can react faster to dynamic risk factors, you have a competitive advantage.

Worried about fraud on the trading floor? Rather than manually track staff trading actions, data lakes enable you to retrieve an instant snapshot of an activity, including data from chat room sites, mobile phones, and swipe in/ out records. Suspicious transactions can be identified and stopped as they are happening in real time, before incurring huge fines and damaging your firm’s reputation.

Big Data Analytics has already proved its mettle within e-commerce, and will surely be a game changer for risk professionals. And don’t worry – this new technology is merely one more tool in a risk manager’s arsenal. It does not, and should not, replace the human element — Identifying what’s a signal and what’s merely noise, what you react to and what you ignore is still a judgment you need to make.

Learn more about the applications of Big Data in Risk Management in our next executive development program, which will be conducted on 21st and 22nd September in Mumbai. Click here to learn more.